If you have a specific US market entry tax question please complete the ‘Have a tax question?’ form on the right hand of the page and subscribe to our mailing list. The first 100 subscribers will get a copy of our US Market Entry e-book!

Choosing between a corporation and a LLC is a difficult task because it requires business owners to trade off benefits.

To quote Simon Sinek, ‘you need to start with the why?’ What is your need? Are you setting up the entity because you have immediate needs like opening an office and employing local people, or are you setting up the entity to bill local customers?

Immediate need in many cases will trump tax planning because without revenue you have no tax and I cannot argue with that logic! If you fall into this category acknowledge this, get your entity formed, and accept there may be some expensive pain down the track when you are forced to restructure your business prior to a transaction.

Understand, what success looks like for you!  Are you building a global business to create long term cash flow or are you trying to create capital value that gives you an asset to sell. You can have start with the former and move to the latter but in our experience people tend to be focused on one or the other. Be real about your goals and make structural choices with this in mind.

Finally, think about your stakeholders (owners of the business). Where are they tax resident and what does the after tax return look like for them? Some choices may benefit stakeholders that are resident of country A more than those in country B. You need to ask yourself if that is ok? You need to be aware of the fact that a future buyer of your business may dictate the deal structure so you will want to be comfortable that the choice you make today will be the right one in 3, 5 or 10 years down the track.

So when other lawyers say that LLCs are better choices than corporations it is important that you understand the context of such a statement. Yes – they are simpler if you are solely considering US corporate law. Comparatively, there is nothing simple about an LLC taxed on a flow through basis that has owners in multiple countries whereas there is something inherently simple about owners based in multiple countries owning shares in a corporation that can retain profit.

Asena advisors. We protect Wealth.